India's potential to further boost its already-leading role in global generics production, as well as being an offshore location of choice for multinational drug manufacturers seeking to curb the increasing costs of their manufacturing, R&D and other support services, presents an opportunity worth an estimated $48 billion in 2007.
Pharmaceutical production costs are almost 50 percent lower in India than in Western nations, while overall R&D costs are about one-eighth and clinical trial expenses around one-tenth of Western levels. India's long-established manufacturing base also offers a large, well educated, English-speaking workforce. The industry provides one of the highest rates of intellectual capital per dollar worldwide.
Prescription drugs worth $40 billion in the U.S. and $25 billion in Europe are due to lose patent protection by 2007-08. It is forecast that Indian companies will likely take around 30 percent of the increasing global generics market. Currently, the Indian industry is estimated to account for 22 percent of the generics world market. Low production costs give India an edge over other generics-producing nations.
Companies based in India and China could be among the first to bring biogenerics (generic versions of biological products) to the regulated markets.
In 2003-04, biopharmaceuticals accounted for 60 percent of India's total biotechnology market. Investment in the sector was up 26 percent. The domestic biopharmaceuticals sector grew 38.5 percent.
As an information technology leader, India, with access to specialist skills and 24/7 work hours, is becoming the destination of choice for contract research, including drug discovery. Companies have been expanding their activities in India to new business segments such as bioinformatics and life sciences.
The global pharmaceutical market is estimated to represent huge opportunity for India in 2007, in terms of:
- manufacturing outsourcing ― the supply of active pharmaceutical ingredients and intermediates
- development outsourcing ― conducting preclinical and clinical trials
- customized chemistry services ― contract research services for compounds pre-launch.
India is regarded as a R&D ‘hotspot’, where:
- companies are able to tap into existing scientific and technical expertise networks
- there are good links to academic research facilities
- the environment supports innovation
- it is easy to commercialize.
Costs of pharmaceutical innovation in India are estimated at one-seventh of their levels in Europe and the country's clinical research industry is currently growing 40 to 50 percent annually and may be worth as much as U.S. $1 billion to Indian firms in 2008.
India has only recently begun protecting product patents, backdated to 1 January, 2005. Since the introduction of product patents multi-national companies have largely returned to India.
The prices of certain drugs, accounting for around 40 percent of the retail pharmaceutical market, are controlled by the Drug Price Control Order of 1995. The government's 2002 Pharmaceutical Policy would have reduced the numbers of price-controlled drugs still further but this proposal is currently under judicial review.
There have been calls for the government to:
- focus more on health care spending
- stop the pressure to reduce drug prices
- provide incentives to allow companies to make additional profits that can be used for more research
- provide tax incentives to attract more foreign investment.
The government is currently drafting a National Pharmaceuticals Policy and is also starting to develop an infrastructure for clinical trials.
Local Indian pharmaceutical manufacturers need to significantly increase their R&D expenditure. At two percent of sales these are currently far below the global level of 10 to 20 percent.
India currently spends just 4.5 to 5.0 percent of its GDP on health care, and public spending accounts for just 0.9 percent, putting the nation among the 20 lowest-spending countries worldwide.
Drug manufacturers are currently some of the most aggressive overseas investors of all Indian industries. They are pursuing foreign acquisitions due to their need to:
- improve global competitiveness
- move up the value chain
- create and enter new markets
- increase their product offering
- acquire new products
- consolidate their market shares
- compensate for continued sluggishness in their home market.
The value of Indian industry purchases has grown from $8 million in 1997 to $116 million in 2004. This rise is expected to continue.
